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PTC India: Higher other income boosts profits - Views on News from Equitymaster

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PTC India: Higher other income boosts profits
Nov 16, 2013

PTC India declared its results for the quarter ended September 2013. The company's standalone revenues and profits were up by 12% YoY and 39% YoY respectively during 2QFY14. Here is our analysis of the results.

Performance summary
  • Revenues increase by 12% YoY during the quarter led by a 15% YoY rise in traded volumes.
  • Operating margins expand by 0.2% YoY to 2.2% leading to a faster 19% YoY increase in operating profits (on an absolute basis).
  • Higher other income (which includes dividend payment of Rs 139 m) coupled with a better operating performance aids in a 39% YoY growth in net profits.
  • During 1HFY14, revenues and profits grow by 24% YoY and 31% YoY respectively.


Standalone numbers...
Rs (m) 2QFY13 2QFY14 Change 1HFY13 1HFY14 Change
Trading volume (MU) 9,428 10,820 14.8% 15,994 19,238 20.3%
Net revenue 27,930 31,402 12.4% 47,804 59,106 23.6%
Expenditure 27,359 30,723 12.3% 46,915 58,087 23.8%
Operating profit 571 679 18.9% 888 1,019 14.7%
EBIDTA margin (%) 2.0% 2.2%   1.9% 1.7%  
Other Income 62 189 205.0% 83 270 226.3%
Depreciation 10 11 9.0% 20 21 8.1%
Interest 4 3 -17.5% 5 7 35.3%
Profit before tax 619 853 37.9% 946 1,261 33.3%
Exceptional items (0) (0) -66.7% - -  
Prior period expenses - -   23 3 -86.2%
Tax 173 235 35.8% 271 349 28.7%
Effective tax rate 28.0% 27.5%   28.7% 27.7%  
Profit after tax/ (loss) 446 618 38.8% 698 915 31.1%
Net profit margin (%) 1.6% 2.0%   1.5% 1.5%  
No. of shares (m)       295 296  
Diluted earnings per share (Rs)*         5.1  
Price to earnings ratio (x)*         11.4  
* (Trailing 12 month earnings)

What has driven performance in 2QFY14?
  • PTC's trading volumes increased by about 14.8% YoY during the quarter gone by. This led to a revenues growth of 12.4% YoY. The company's operating profits grew by 19% YoY as margins expanded by 10% YoY to 2.2%. Higher other income (on account of dividend income of Rs 135 m; nil in the previous year) led to a profit growth of 39% YoY.

  • Of the total volumes traded, short term volumes contributed to nearly 55% of volumes (52 last year). Cross border volumes formed about 26% of volumes as compared to about 31% in the previous year. Long term volumes formed 14% of the total volumes as compared to 13% last year.

  • During 1HFY14, volumes, revenues and profits increased by 20% YoY, 24% YoY and 31% YoY respectively.
What to expect?
At the current price of Rs 58, the stock is trading at a multiple of 0.74 times its FY13 book value per share and 11.8 times its trailing twelve month earnings per share.

During the previous quarter, the key concern highlighted of the company receiving collections from state electricity boards - especially UP and Tamil Nadu discoms - seems to have been curbed as the company received a payment of Rs 7.7 bn (in early October 2013) from UPPCL (UP SEB). As for the payment dues from Tamil Nadu (Rs 2.5 bn), the management expects payments to be received soon (by the end of the year).

The stock of PTC has surged over the past few months. PTC India's current market capitalisation stands at about Rs 16.87 bn (Rs 11.8 bn in previous quarter), an increase of about 43%. The company remains a debt free firm. The cash on books stands at about Rs 9-10 bn (post receiving payment from UPPCL; which forms about 53-59% of market capitalisation). Total non-current investments as of FY13 stood at Rs 9.13 bn. Post a 25% discount, the investments are valued at Rs 6.8 bn. Current investment stand at about Rs 1 bn. all these values combined form nearly as much as the company's market cap, which curb the downside significantly.

While the stock may seem attractive at the moment, given the broader concerns over the power sector, we maintain a hold view on the stock from a long term perspective.

We would like to remind you that within the overall exposure to equities, you must ensure that you broadly follow our suggested and that no single stock comprises more than 5% of your portfolio.

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